ment, as being itself an act of bankruptcy. Such an assignment, though rendered fraudulent and an act of bankruptcy as contrary to the spirit of the Bankruptcy Acts, even where there is no actual fraud, does not become fraudulent in fact and for all purposes. So where a debtor became bankrupt upon his own petition, and under the Bankruptcy Act then in force there was no "relation back," it was held that the assignment was not available by the assignees (1). But this rule has been qualified to this extent, that if the transaction amounted to a fraudulent preference within the meaning of the Bankruptcy Acts, although not capable of being treated as an act of bankruptcy, the transaction could then be assailed by the assignees as voidable (m).

§ 4.

of trustee's

title.

With respect to the important doctrine of relation back Relation back under the present Act (see notes to Sect. 43), it is submitted the clear intention of the framers of the present Act is that the title of the trustee shall relate back to prior acts of bankruptcy upon his appointment, whether such appointment result from proceedings founded upon the debtor's petition or a creditor's petition. It is provided (Sect. 4, sub-s. 1 (ƒ)) that the filing of a declaration of inability to pay, or the presentation of a petition by the debtor, shall be an act of bankruptcy. Also (Sect. 8) that the debtor's own petition shall allege that he is unable to pay his debts, and on the presentation thereof shall be deemed an act of bankruptcy, without the previous filing by the debtor of any declaration of inability to pay his debts, upon which the Court is to make a receiving order. Upon such order being made, and upon adjudication thereupon, all the consequences and various provisions of the Act follow in regular sequence. And upon the bankruptcy of the debtor, and the trustee's appointment, the title of the trustee is to have relation back to, and commence at the time of, the act of bankruptcy being committed, on which a receiving order is made against the debtor, or to such earliest act of bankruptcy (where more acts of bankruptcy than one have been committed) as he may have committed within three months next preceding the date of the presentation of the bankruptcy petition, and

(1) Jones v. Harber, L. R. 6 Q. B. 77; Mercer v. Peterson, L. R. 2 Ex. 304; Affirmed, 3 Ex. 104.

(m) Marks v. Feldman, L. R. 5 Q. B. 275; and see Wills, J., in

Lomax v. Buxton, ubi supra, and
Smith's L. Ca., 7 Ed., p. 25; and
see Stevenson v. Newnham, 13 C. B.
286; 22 L. J. C. P. 110.

§ 4.

Past debt.

whether the bankruptcy takes place on the debtor's own petition or upon that of a creditor or creditors.

Under the Acts of 1849 and 1861, there was no relation back of the assignee's title under a debtor's petition, but the Act of 1869 (n) expressly established such title in respect to a petition for liquidation by arrangement. And if this submission be correct as to the effect of the present Act, there will be no distinction between the operation of the debtor's petition and the creditor's petition, in respect of such relation back; and the result will follow, that where such assignment is within three months of the petition, and the trustee's title relates back to it, it will not then become necessary to show actual or positive fraud so as to render the transaction invalid as against the trustee, by whomsoever the petition is presented; but where the transaction cannot be affected as an act of bankruptcy to which title will relate, to avoid it positive or actual fraud must be shown to exist. And see as to jurisdiction in such cases (nn).

What amounts to "substantially the whole of a debtor's property" will, as a question of fact, always depend upon the circumstances of each case. A colourable exception of a part of a trader's property will not save an assignment which substantially covers the whole, and the true test as to whether such a transaction is colourable or not seems to be this-Will the assignment, if acted upon notwithstanding the exception, produce insolvency? (0).

So it has been held that an assignment for a past debt by a partner in an insolvent firm, of all his separate assets, is fraudulent and void, though it does not include the partnership assets (oo). And an assignment also by a partner in an insolvent firm of the partnership assets, to secure his private debts and future advances, was also held void (p).

Where the property excepted would not pass to the trustee, and was not capable of being seized in execution, it was held

(n) S. 125, pars. 4, 5, & 7; and see Ex parte Eyles re Edwards, L. R. 16 Eq. 99; 42 L. J. Bank. 55; Ex parte Duignan re Bissell, L. R. 6 Ch. 605; 42 L. J. Bank. 33; and see Stevenson v. Newnham, 13 C. B. 285.

(nn) Ex parte Price, 21 Ch. D. 553. (0) Young v. Waud, 8 Ex. 221; Leake v. Young, 5 E. & B. 955;

Young v. Fletcher, 34 L. J. Ex. 154 ;
Smith v. Cannan, 2 E. & B. 35;
Siebert v. Spooner, 1 M. & W. 714.

(00) Ex parte Trevor re Burghardt, 1 Ch. D. 297.

(p) Ex parte Snowball re Douglas, L. R. 7 Ch. 534. See also as to voluntary settlement, Re Ridler, Ridler v. Ridler, 22 Ch. D. 74.

§ 4.

the whole of the property was assigned (q). So, also, an exception of a tenant-right from an assignment by a farmer (r). A substantial amount of book debts will, however, constitute a sufficient exception (s). On the other hand, if the value of both book debts and household furniture reserved be insignificant, and the bulk of the property was placed out of the reach of the debtor's other creditors, the transaction will be deemed fraudulent (t). If the consideration be a present one, it is then treated Present as if there were a substantial exception. As was said by Cock- advances. burn, L. C. J., in the case of Woodhouse v. Murray (u):

"It may be that the trader gets less than the value of the property he parts with. It may be that under the pressure of some extraordinary exigencies, the trader, with an honest object of saving himself from bankruptcy and ruin, with a view to his own benefit and that of his creditors, and with an honest and bona fide desire to carry on his trade, pledges his effects, even the whole of them, to realise a sum of money which may fall very short of their value, yet looking at all the circumstances, it is so plain the intention was an honest one, not to get a sum of money to put into his pocket, but to carry on his business, then such an assignment of all his effects would not be considered an act of bankruptcy."

The withdrawal of an execution already levied, or forbearance to sue upon an existing security and unless there is a binding agreement not to enforce such security, or forbearance to issue execution upon goods of a judgment debtor, or forbearance to take possession under a bill of sale, have ali been held not to have been sufficient equivalents (x).

The question is, therefore, not simply one of amount (y), but whether the advance is made to enable the debtor to carry on his business, and not merely to security for his past debt (z).

(9) Ex parte Hawker re Kealey, L. R. 7 Ch. 214; 41 L. J. Bank. 34; and Smith v. Cannan, ubi supra.

(r) Ex parte Dann re Parker, L. R. 17 Ch. D. 26; 44 L. T. 760. (8) Ex parte Burton re Tunstall, 13 Ch. D. 102; and Ex parte Field re Marlow, 13 Ch. D. 106.

(t) Exparte Foxley re Nurse, L. R. 3 Ch. App. 515.

(u) Ubi supra.

enable the creditor to obtain a
The equivalent may be of a

(x) Woodhouse v. Murray, supra;
Ex parte Cooper re Baum, L. R. 10
Ch. D. 313; 48 L. J. Bank. 54;
Ex parte Payne re Cross, L. R. 11
Ch. D. 539; and see Philps v. Horn-
stedt, L. R. Ex. 829; disapproved.

(y) Ex parte Ellis re Ellis, 2 Ch. D. 797; 45 L. J. Bank. 159.

(z) Ex parte Greener re Vane, 46 L. J. Bank. 76; Ex parte Fisher re Ash, L. R. 7 Ch. 636; 41 L. J. Bank. 62.

§ 4.

Further advances.

fresh advance made either concurrently with the execution of the assignment, or, what is tantamount to it, made previously to such assignment under a binding promise or agreement to give such subsequent security (a). And so if there is a contemporaneous parol agreement to make advances, and such advances are in fact made, even though the deed contain no covenant to make advances (b). But if the giving of such security have been purposely postponed, with the object of protecting the grantor's credit, and until he becomes insolvent, or is on the verge of bankruptcy, the antecedent advance will not support the assignment (c). But, on the other hand, the fact that advances have been subsequently made will not prevent the conveyance being an act of bankruptcy if there were no prior agreement that such advances should be made(d). Where also the whole of a debtor's property was transferred as a security for a past debt and a further advance, but the advance was proved to have been merely for the purpose of paying off another creditor, the transaction was held to operate as a fraudulent preference (e). Forbearance to seize under a prior bill of sale of the whole of the property given for a past debt is not equivalent to a fresh advance so as to support a subsequent bill of sale and prevent its being an act of bankruptcy as a fraudulent conveyance (ƒ). If, however, there is an honest giving of time to the grantor— for instance, if bills be retired on which the debtor is liable(g), or an overdrawn banker's account discharged (h), or a valid charge has been paid off and the estate relieved (hh), or where the creditor has withdrawn a stop upon goods consigned to the debtor (i), or has supplied him with goods on credit (k)—in

as,

such and the like cases, inasmuch as the effect is not to suspend necessarily the business of the debtor but ordinarily to enable him to continue, and though in the result the transaction has not had the effect of so continuing him, yet it will be held under the circumstances that there was no fraud.

§ 4.

The doctrine laid down in Graham v. Chapman (1), or that After-acquired which is said to have been so laid down in that case-viz., that property.

The

a bill of sale so worded as to enable the grantee to seize, not
only all the existing property of the grantor, but all the pro-
perty which he should acquire by means of the money advanced
to him, was void as necessarily defeating and delaying the
creditors of the grantor-has recently been discussed and
dissented from in the Court of Appeal, and the law has to
some extent been now settled in Ex parte Hauxwell re Heming-
way (m) (reversing Bacon, C.J.), where a bill of sale was given
to two guarantors or sureties to a bank in pursuance of a
prior agreement to give such bill upon their undertaking to
secure advances to be made by the bank at the time of such
agreement to the grantor on the faith of such guarantee.
bill, when given, assigned to the grantees all the grantor's
then existing personal property and enabled the grantees also
to seize all property afterwards to be acquired by him until
the satisfaction of the security; about four months afterwards
the grantor petitioned, and the trustee claimed the whole of
the property comprised in the bill of sale, and the Court of
Appeal held that (1stly) the prior agreement did not come within
Sect. 9 of The Bills of Sale Act, 1878 (as a prior bill of sale
followed by a subsequent bill of sale); (2ndly) that the assign-
ment had not been postponed to protect the grantor's credit (n);
and (3rdly) that it did not constitute an act of bankruptcy.
Lindley, L. J., said, "If Graham v. Chapman did so decide
(referring to the proposition above laid down as to after-
acquired property), "it was distinctly wrong. That had been
said again and again in subsequent cases. He was not sure that
was really the meaning of Graham v. Chapman; it might be
susceptible of the explanation suggested by the late Willes, J.,

(4) 21 L. J. C. P. 173; and see Hutton v. Cruttwell, supra; which decided that such an assignment was not an act of bankruptcy; Kevan v. Mawson, 24 L. T. N. S. 396; Lomax v. Buxton, L. R. 6 C.

P. 107; 40 L. J. C. P. 150; in
which Willes, J., treats the point as
undecided.

(m) See Law Times, May 19, 1883.
(n) See Ex parte Kilner, supra.